The greater the magnitude of the absolute value of the income elasticity of demand for a good, the more the
A) demand for that good changes when income changes.
B) total revenue for firms producing that good changes when income changes.
C) price of the good changes when income changes.
D) All of the above answers are correct.
D
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The inefficiencies associated with dead capital can
A) lead to increased consumption. B) increase the amount of investment as businesses look for more technologically advanced capital. C) lead to more economic freedom as firms try to get rid of the inefficient capital. D) reduce the rate of return on investment.
Banks experience interest rate risk
A) if adverse selection problems are particularly severe. B) if moral hazard problems are particularly severe. C) on any investment that has high information costs. D) if changes in interest rates cause bank profits to fluctuate.
According to Keynesians, an increase in the money supply will have its least impact on GDP and the greatest impact on the price level when the aggregate demand curve intersects
a. the horizontal portion of the aggregate supply curve b. the vertical portion of the aggregate supply curve c. the upward sloping portion of the aggregate supply curve d. either the horizontal or upward sloping portion of the aggregate supply curve e. either the horizontal or upward sloping portion of the aggregate supply curve
The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should
a. lower the price of the cinnamon rolls. b. leave the price of the cinnamon rolls unchanged. c. raise the price of the cinnamon rolls. d. reduce costs.